Accounting Primer: Different Income Statements for Different Business Types

Different Income Statements for Different Business Types

Different types of businesses need different types of Income Statements. Here are some of the different types of business and the differences that you would expect to see in their Income Statements based on the differences in their businesses:

Service Businesses: These businesses will have a section called Cost of Services where the directly variable costs related to providing the Services will be shown. Items that may be included in this section would include

  • Credit Card Processing Fees
  • Contract Labor if directly related to the Services provided
  • Room Rentals and Equipment Rentals if directly related to the Services provided
  • Other costs directly related to the Services provided
  • The Sum of Above equals Cost of Services Provided

Wholesale Businesses: These businesses will have a Cost of Goods Sold section which will include:

  • Beginning Inventory, plus
  • New Inventory Shipments Received, plus
  • Freight Costs, minus
  • Ending Inventory in Stock equals
  • Cost of Goods Sold

Manufacturing Businesses: These businesses will have a Cost of Goods Sold section which will include:

  • Beginning Finished Goods Inventory, plus
  • Cost of Goods Manufactured, minus
  • Ending Finished Goods Inventory, equals
  • Costs of Goods Sold

Restaurants: These businesses will have a Cost of Goods Sold section which will include:

  • Beginning Food and Beverage Inventory, plus
  • Food and Beverage Purchases, minus
  • Ending Food and Beverage Inventory, equals
  • Costs of Goods Sold

Retailers: These businesses are very similar to wholesalers. They will have a Cost of Goods Sold section which will include:

  • Beginning Inventory, plus
  • New Inventory Shipments Received, plus
  • Freight Costs, minus
  • Ending Inventory in Stock, minus
  • Customer Returns and Discounts, equals
  • Cost of Goods Sold

Construction Companies: These types of businesses will have the following costs:

  • Labor
  • Materials
  • Sub-Contractors
  • Miscellaneous Job Costs
  • Overhead Burden Assigned to Projects
  • The Sum of Above equals Cost of Construction

Transportation Companies: They ship stuff for other companies. The person that they pay to drive the truck is a direct cost… a Cost of Goods Sold. Other direct costs would be fuel, worker’s compensation insurance, liability insurance, satellite tracking services, etc.

If you have any questions or would like to have a conversation about your business goals please feel free to give me a call. I routinely consult with small business owners on how to improve their profitability and revenue and would be glad to have a conversation at your convenience.

Lee Thurburn – 214-772-6854